Consumer spending sees the smallest increase in seven months. Is the economy getting weaker?

By Jeffry Bartash

Americans spend less on gas, new cars and recreational vehicles

Customer shop for produce at a Farmers Market in California.

Consumer spending rose in July at the slowest pace in seven months, suggesting the U.S. economy lost a little steam after the end of the 2026 World Cup and start of the third quarter.

Personal spending increased a mild 0.2% last month, the government said. Americans spent less on goods for the second month in a row after splurging in the spring.

Lower gasoline prices last month made spending look weaker than it really was, but households also had to rebuild savings after using rainy-day funds to cope with a surge in inflation this year.

Consumer spending is the main engine of the U.S. economy. Spending in the second quarter grew at a surprisingly robust 3.5% annual pace, adjusted for inflation, after a meager 0.5% increase in the spring.

The slowdown in July, however, could point to softer growth in the third quarter.

Key details: Americans bought fewer cars and recreational vehicles in July and spent less on gas due to lower prices at the pump.

Spending on investments, insurance, food, hotels and transportation increased.

The savings rate rose to 3% in July from 2.6% in the prior month.

Incomes, meanwhile, increased a solid 0.4% last month.

Incomes have risen 3.7% in the 12 months ended in July, just barely keeping up with inflation.

Big picture: Americans are still spending more than enough to keep the economy expanding even though they face more financial strain from higher prices for gas and other staples.

Low layoffs and low unemployment have provided a base of support. The booming stock market and gold rush in artificial intelligence are also adding to the growth of a resilient U.S. economy.

"People are growing more cautious after five months of inflation wiping out wage gains," said chief economist Heather Long of Navy Federal Credit Union. "Belt-tightening will be a big theme this fall and holiday season."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX fell in Wednesday trading.

-Jeffry Bartash

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